Stan Lee Fights for Control of His POW! Entertainment (Exclusive)

The Avengers Premiere Stan Lee - H 2012
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The Avengers Premiere Stan Lee - H 2012

Comic book legend Stan Lee is involved in another legal mess stemming from a period during which he left Marvel, formed his own company and then resolved his difficulties with Marvel. For years, he has been battling those who purport to control his former company, Stan Lee Media Inc. (SLMI), over whether he illegally diverted valuable intellectual property when the company went bankrupt. So far, Lee has been largely successful on this front.

But now, Lee, as well as some of his associates including Gil Champion, chief executive of Lee's POW Entertainment, and recently deceased attorney Arthur Lieberman, are facing a $3.6 million lawsuit that puts the future of POW at stake.

POW is the home to Lee's creations since 2001 and currently has a first-look deal with Disney. But the allegations against Lee's company include substantial violations of securities laws.

In 2001, Lee left bankrupt SLMI and formed POW Three years later, POW executed a reverse merger with Arturion Entertainment that allowed POW to become a publicly traded company without the lengthy registration process.

At the time, another PR consulting company called Media Dynamics (MDI) was the controlling shareholder of Arturion, Valerie Barth was the president, and UltraVision Inc., whose sole director was Ron Sandman, was a minority shareholder. Now, Barth, who says she spent years helping Lee on the PR front, and Sandman, along with their respective companies, have gotten into a contentious legal fight with Lee in an obscure California county court.

Recently, Barth and Sandman have been making a stink that they were robbed of Arturion by Lee. So much so that POW filed a lawsuit in Del Norte, Calif., against them for breach of contract and fraud. POW alleges that Barth and Sandman owe $1.15 million, plus interest, in connection with a Subscription Agreement where they attained three million shares of POW! common stock. POW also says it has a security interest in Barth's property and is attempting to foreclose on it.

Barth and Sandman have struck back with a 73-page countersuit that alleges Lee participated in a conspiracy to inflate the worth of POW's assets at the time of the merger, fraudulently took control of the Arturion company and, along with his partners, violated dozens of laws.

According to the cross-complaint, Sandman was approached in late 2003 about the possibility of soliciting Arturion's shareholders about a reverse merger and acquisition of Lee's POW The former stakeholders of Arturion say that at the time, they never heard about SLMI and only knew Lee from his association with Marvel and his success creating characters including Spider-Man, X-Men and others.

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But they were intrigued by the idea, meeting Lee and his partners, who allegedly introduced themselves "in such a way that one would never think that he may not have owned the rights to his name and brand nor any of the other assets that POW was representing."

They say they were given documents that purported to show that various rights to Lee's intellectual property, including his own name and likeness and brand signatures, were firmly under POW's control. And they say that a prospectus downplayed any threat of litigation. But the former Arturion stakeholders point to agreements made by Lee with SLMI and resulting lawsuits, including one decision that purportedly canceled an assignment, and say they were victim to misrepresentation.

At that time of their deal, the suing individuals say they gave up 40 million shares of Arturion and control of the company and induced to make a further $500,000 investment "for the right to simply retain 769,250 shares of MDI’s own common stock" and induced into enter into a subscription agreement to purchase shares for an additional $650,000.

Barth and Sandman also say that Lee and his partners breached the reorganization agreement by failing to obtain a minimum of $1 million worth in financing. They say the negative buzz over the SLMI blow-up hurt efforts to prop up the new company. According to the legal documents:

"As a result of the lawsuits, criminal issues and financial difficulties that POW had concealed ... Arturion participating shareholders had great difficulty securing financing for POW. These difficulties stemmed in large part from the negative public perception of POW that was a result of the lawsuits, criminal issues and financial difficulties that plagued POW’s management's former company, which became widely known across the Internet. This negative public perception made investors wary of purchasing stock in POW coupled with POW management’s failure to file proper disclosures about the company."

MDI says that in 2006, it entered into two consulting agreements with POW to save the company's public reputation, that POW was to give them 3 million to 5 million shares as compensation and that POW was to conduct a 2-for-1 forward stock split in 30 days. POW allegedly failed to comply with requirements on press releases and disclosures yet demanded that MDI perform fully.

Eventually, the UltraVision stakeholders grew tired and sought to sell shares. They allegedly were blocked by Lee, Champion and Lieberman from putting restricted stock on the market, and in response to a threatened lawsuit, Lee's team allegedly executed such moves as faking a stay on claims. Things kept getting more messy, and according to the cross-complaint, "The POW members conspired to bankrupt the cross-complainants in order to prevent them from filling suit against the company or even be able to defend themselves."

This all was happening as a happy face was put on the company. For example, Barth alleges that it was her efforts that eventually got Lee a star on Hollywood's Walk of Fame.

The allegations go on and on. Complainants say that POW participated in many securities violations: failing to follow required legal formalities for a corporation like keeping adequate accounting books, treating the assets of POW separate from personal assets, failing to adequately capitalize the company, issuing false and misleading public statements about the company to induce false confidence among investors. POW allegedly allowed Lee to divert and commingle revenue for Lee’s consulting, signatures fees, appearances, honorariums, interviews, literary works, acting and other engagements and services.

In sum, Barth and Sandman say that POW is basically a fiction, an entity that allows Lee, Champion and Lieberman to get away with personal interests -- "a mere shell without adequate, sufficient or reasonable assets or capital with which to carry on the business in which it was engaged."

Barth, Sandman, Media Dynamics and Univision are asserting fraud under the Securities Exchange Act, fraud in violation of California Corporate Securities Law, inducement, breach of contract, stock blocking, breach of fiduciary duty, conversion, rescission, negligent misrepresentation, breach of good faith and fair dealing, slander of title and other causes of action.

They are seeking the removal of POW's board of directors, the transfer of shares, at least $3.6 million in compensatory damages and further relief.

POW is alleging Barth and Sandman committed their own respective fraud and state in its own complaint that their adversaries' "true intention" was "to obtain POW! common stock without paying therefor and thereafter engage in stock manipulation."


Twitter: @eriqgardner